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And with no end in sight to the cost crunch, the prognosis is poor.

Panicked business owners now cite the rising cost of health insurance as their top concern. They know that workers value their medical coverage, but as owners they feel trapped-they must either pass along rate hikes or cut benefits entirely.

A relatively new health plan option offers hope. Health savings accounts work in IRA-like fashion to cover out-ofpocket medical costs with tax-sheltered money. An HSA is an investment account funded by each individual, with optional contributions from your business. The accounts must be linked to an insurance plan that has a high deductible of at least $1,050 for an individual or $2,100 for a family. Money from the HSA pays health expenses until the insurance kicks in.

Unspent funds carry over, so the accounts have the potential to rack up big balances over years of untaxed contributions and investment gains. And premiums on health plans with high deductibles are much more affordable. Employer contributions to a tax-favored HSA are exempt from payroll taxes, and the employee is not taxed either.

The plans became available Jan. 1, 2004 and competes with other tax-advantaged health care options. But as medical costs soar, HSAs are becoming more popular. Here are some key features:

The annual contribution limit to an HSA matches the deductible on your health insurance, up to $2,700 for an individual and $5,450 for family coverage. Amounts are adjusted annually to inflation.

The employer, individual or both can make contributions.

Plan providers usually are insurance companies or banks. Businesses that set up the plans arrange for employee HSAs.

To be eligible, an individual must be covered by a high-deductible health plan and cannot have other health insurance.

Individuals have control over the assets in their account.

HSAs can't do anything about soaring medical costs, but they at least give smallbusiness owners and employees a taxsavvy tool to keep coverage in place. These resources can fill you in and get your business up and running with an HSA plan:

National Federation of Independent Business offers savvy info on HSAs and other small biz health plans. Go to www.nfib.comand look in the Tools & Tips section under Health Insurance.

National Association of Health Underwriters also has an HSA section on its Web site with basic info on how HSAs work. Look for the HSA Guide under Consumer Info at www.nahu.org.

The HSA Insider is a site devoted to HSAs. Visit www.hsainsider.com.

HSA Resource Center can put you in touch with insurance companies that offer HSA plans in each state. Go to www.hsaresourcecenter.com.

eHealthInsurance is a Web site where many business owners comparison-shop for health insurance. Visit www.ehealthinsurance.com.

HSA Finder is an independent resource with good Q&A info. Visit www.hsafinder.com.

Kehrer is editor at Business.com, a leading business search engine. He can be reached at editor@business.com.

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